John D. Craig
Commercial property owners are faced with many duties to effectively operate and manage a property. There are leasing concerns, maintenance work, tax issues, tenant conflicts and administration tasks. The list goes on and on. But comprehensive property management can coordinate these responsibilities and, over time, increase property value.
Marketing commercial buildings requires a consistent, organized and responsive plan. The plan must take into account owner concerns, within the context of market dynamics. Understanding the extent of future market demand, gauging the level of leasing activity in new and re-let properties, and establishing the financial parameters of current and projected lease transactions are all fundamental to owners and developers making new investment decisions. Also, the basic design decisions that owners and developers make for the use of a property have enormous impact on the success of the project.
Tenant disputes both large and small can be tricky affairs, but they can be worked out to the satisfaction of both sides if care is taken to listen to both parties. For example, a new tenant had recently moved in to a single-story building. The owner had previously agreed to allow the tenant to affix their sign on the building. In addition to hanging the sign, the tenant painted the exterior brick an extreme color. This was not communicated to the owner beforehand. After careful mediation, all parties were satisfied with a compromise: the tenant repainted the brick exterior back to its original color, and their sign was reinstalled with a narrow color band behind it. The tenant was happy because the narrow band accomplished the logo consistency they were after, and the owner was pleased because the building’s exterior look was not compromised.
Problem Solving
It’s crucial to understand and accommodate tenant needs because promoting tenant loyalty is less expensive than acquiring new tenants. Recently, a software developer with 400 employees had leased 145,000 square feet on a 10-year lease in a building. Due to restructuring, the tenant needed to reduce their financial exposure on the lease. By working closely with the broker, we were able to quickly obtain a world-class subtenant for 75,000 square feet. We also moved quickly to find a less expensive space within the same complex for the tenant. By listening to your renters’ needs and responding quickly, you can retain tenants even during times of financial difficulty.
Adding value to your property through adept property management requires overseeing projects with the owners’ objectives in mind. A recent opportunity involved renovating three drab buildings built around 1962. We recognized the inherent value of the location of the property and created a highly regarded office park. This was accomplished through forming an alliance with local and state agencies to develop a public park along the river that flowed near the building. The fulfillment of the plan included adding 14 percent more space to existing buildings, upgrading systems and landscaping, developing multitenant floors and significant pre-leasing. Rents increased, vacancies dropped and the long-term value of the property grew substantially. We created a 20 percent cash-on-cash return on the renovation investment.
The number and level of maintenance services required to retain asset value is quite significant. Plumbing, HVAC, carpentry, cleaning, electrical, grounds, elevators, general maintenance, painting and pest control. The list goes on. Property managers who can directly control the quality and cost of these services are in a better position to deliver value to their owners. Because we cannot blame poor service on anyone but ourselves, we can guarantee owners the performance they need.
Keep in mind that property management and creative thinking go hand in hand. Successful cooperative efforts require more than an idea. Investigate needs, meet with tenants and owners, perform income feasibility studies, and with a little bit of elbow grease, the full value of comprehensive property management skills can be realized, increasing the satisfaction of tenants and owners alike.
